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Degrowth – is it useful or feasible?

January 19, 2010

Thought I’d check out what this ‘degrowth’ idea is about so went to a public meeting organized by a couple of new economics thinktanks (CEECEC and nef). It was a combination of seriously old school (standing room only; two and a half hours of speeches) and new (the bar was open throughout the event; death by powerpoint).

‘Degrowth’ is the clunky translation of ‘decroissance’, a movement founded by French

Serge Latouche

economist Serge Latouche, whose name was invoked in reverential tones all night. It’s big in France, Italy and Spain (its second major international conference takes place in Barcelona in March) but has yet to catch on in the UK. Based on last night’s presentations, I think it’s likely to stay that way. Speakers struggled to define what degrowth actually means, merely citing a plethora of economic ideas and schools of thought. As for lowly anglo-saxon concerns like ‘what does this mean for my pension/job/house/children?’, forget it.

Instead, the speakers largely replicated the practices of environmentalists and economists everywhere, presenting a series of ‘if I ruled the world’ fantasies which, however clever, did not connect with everyday issues of power or public opinion. Anyone who disagreed with degrowth was either a knave, a fool or both.

I had more serious concerns than the tone of the event, though. Stephen Spratt of new economics foundation blew a rather large hole in the idea when he argued ‘we don’t know how a shrinking economy would work’. It’s all very well to argue that there are objective limits to growth (as I have done elsewhere on this blog), but what would a world of shrinking GDP actually look like? Episodes of ‘deleveraging’ tend to be chaotic and bloody – collapsing companies, rising unemployment and political turmoil – not the carefully managed downsizing envisaged by degrowth.

There are hard economic reasons for that chaos. ‘De-growth is unstable’ as another speaker, the excellent Tim Jackson, author of ‘Prosperity without Growth’, explained. In the modern economy, labour productivity holds the key to success, driven by competition. That means producing more with fewer people. When you do that, either you grow, or unemployment rises. If one firm decides to pursue ‘degrowth’, its competitors will rapidly put it out of business. It makes the economy sound like a bicycle – if you don’t keep moving forward, you fall off.

‘We’re locked into an economic structure that forces us into growth’, Tim concluded, seeing this basic flaw as the reason for the ‘visceral fear’ he perceives in policy makers when he raises limits to growth with them. They know that shrinking economies jeopardise social and political stability.

What to do? Tim argues that yes, everything has to change before anything can change, but that is possible. Institutions and values are always evolving, and have to do so, if we are to escape from the growth trap. He tried to put meat on the bones of this proposition in Prosperity Without Growth, suggesting ‘12 steps to a sustainable economy’, based on changing our economics and investment patterns, investing in people and redistribution, tackling consumerism and respecting ecological boundaries.

But nothing he said seemed to deal with the bicycle problem. In an effort to end the marathon on an upbeat note, he put forward an essentially voluntarist position that ‘desire and capacity to work for change’ are the key. They are necessary undoubtedly, but so is power analysis, understanding where opponents are coming from and how they can be influenced. To worry about the realities of power is not to be defeatist, it is to be serious about change. But those skills seemed pretty well absent in the room, though at least Tim urged people not to portray opponents of degrowth as ‘cardboard cutouts’, but people with genuine reasons for scepticism.

And there was very little interest in developing countries. The occasional bit of misconceived romanticism, arguing that poor communities are all based on reciprocity and love and have no need of base material things (oh dear), and some nods towards redistribution, but nothing about the possibility of rationing growth to enable it to help poor countries, as I have discussed previously. And lots of comfort for the localizers and food miles people who are quite happy to deprive Africa of export markets. Growth was bad, end of story. Sure growth is a dirty and inefficient way to reduce poverty, but at a national or international scale, we know of no alternatives that have actually worked (rather than been dreamt up in academic common rooms).

Oxfam’s ABC to campaigning says that success requires a problem, a solution and a villain. Degrowth has 2 out of 3 – the problem and the villain – but the solution looks very unconvincing right now. As the word itself demonstrates, it is clear what it is against, but not what it is for and still less, how to get there.

So (at least on on the basis of one evening meeting – I haven’t read Latouche yet), it felt like there’s a long way to go before ‘degrowth’ or anything like it looks like a credible proposition. For starters, can any economists out there help with the bicycle problem – is it real or imagined and if real, how can it be got round?

15 comments

NEF must be loving this crisis. I even saw Andrew Simms has made it onto the FT’s ‘annual economist survey’ – which intern put that list together???

Anyway, this has a good ‘food sovereignty beyond the farm’ feel about it.

On the bicycle question, I sense a once in a lifetime chance for a transatlantic meeting of heterodoxies. The degrowthers should definitely put heads together with the monetary US counterparts, in the anti fractional reserve brigade.

So the bicycle problem with a Poundian slant:

Credit creation is based upon a fractional reserve system – in which money creation is in the hands of private banks through the creation of loans (debt) against a (very small) ratio of bank capital.

The solvency of the main creators of liquidity (banks), are therefore dependent upon continuous expansion of the money supply via new debt (otherwise it becomes impossible to repay the net stock of old debt – hence crisis).

Degrowth would therefore immediately threaten global solvency.

Unless of course you could combine shrinking resource use with continued inflation and renewed debt issuing.

In fact, come to think of it, inflation is a very good way to get people to keep peddling their bicycle whilst not consuming any larger levels of actual goods. Has rather negative distributional outcomes though. And you’d probably lose a large part of the Michigan gold bug chapter.

The spatial implications of degrowth might be worth pondering. Growth tends to be uneven between and within countries, but because we’re such loss-averse animals I suspect uneven degrowth would cause a lot more consternation. Maybe mass migration, too. Makes me wonder what would happen if, say, France decided to ‘go for degrowth’. Would its neighbours try to change its mind? Maybe Germany would try some undercover fiscal stimulus by dropping bundles of Euros out of helicopters …

The bicycle problem is only a problem for finance, not for manufacturing or distribution of goods. In the past, finance has resolved the bicycle problem to its own satisfaction by promoting waste. War and mass unemployment aren’t the problems for finance that they are for populations. So it comes down to “what’s the economy for?” Paying compound interest on investments or sustaining people.

A transition to a stationary state economy can occur gradually with the first step being slower and smarter growth. Economic activity can first be redirected from military spending, planned obsolescence of consumer goods and dirty energy to “wise consumption”. Paradoxically, the first stages of a degrowth economy may require the expansion of a qualitatively better growth.

you might have not be the only one attending that meeting with limited knowledge of Latouche`s arguments. From what you report on this blog even the speakers might have not be familiar with his theory.
I have read few of his books in the Italian tranlastion and I am not sure which of his books have been translated into English.
Latouche challenges the assumption that we need to grow in order to solve povery. Instead we need to take a step back, move our attention away from the GDP and focus on what really creates an healthy and stable society. In his own words, we need to de-colonize our mind and go beyond what we have been taught so far. I know I am giving a very brief and incomplete description of what Latouche argues, my apoligises.
Although I think that the solutions that he puts forward are very limited and I doubt that they would be effective, his analysis is very sharp, subtle and his comments very interesting. He also openly admits that his is just an utopia that, nevertheless, needs to be further developed. I would recomment his books to anybody, good food for thoughts.

If poverty is access to resources, but exploiting more resources (growth) causes environmental poverty, why not extend the library/open source principle to everything and produce less whilst increasing access to it.

Derek Wall proposed this in Babylon and Beyond (2005):

“While state provision can be humanized and markets tamed by the social, the more fundamental task requires that both the state and the market are rolled back. The commons provides an important alternative to both. The anti-capitalist slogan above all others should be ‘Defend, extend, and deepen the commons’… Anti-capitalist globalization could be labeled positively as the movement for the commons. (183–84)…

Open source is an excellent example of how something that does not directly increase GNP can fuel real prosperity: for example, it provides citizens and governments in developing countries with free access to vital computer software… Open source encourages users to add their own touches, focusing attention on the quality of the product. It is a stunning example of how both the market and the state can be bypassed by cooperative creativity. The barrier between user and provider is eroded; a direct agreement between society members is maintained… (188–89)

i was one of the presenters that evening and was wondering why you were saying that “speakers struggled to define .. degrowth”. several of us gave pretty precise definitions (at least i got the impression), myself was explaining the distinction between physical and economic degrowth.

what was lacking, and possibly you are reffering to this, were concrete descriptions on how degrowth might be achieved and what its implications are. however, in my talk i was trying to susbstantiate degrowth in a business context by giving two recent empirical examples and hinting on some issues that most likely will arise in the future from it.

my position on the degrowth issue is empirical: degrowth is happening and we can gain insight from looking at how economic actors — consumers, businesses, nations — cope with that. probably this was what put me off a bit: the normative force of some arguments and the appeal to develop a theory of degrowth in order to manage it. maybe looking at the real world is more helpful than trying to bend equations until they work.

Pls excuse any ignorance I’m still getting up to speed on all this. Personally I’m more interested in the ethical foundations of all this esp in regard to finite resources.

But having said that it seems to me it isn’t so much a question of how or should we degrowth, but how to deal with it when we do when resource scarcity like Peak Oil cuts in. How we deal ethically with Climate Change is starting to raise global commons etc but as the resistance of developed nations to take resposibilty for polluter pays shows its going to be a hard sell. Notice the uproar over Avatar.

Maybe though as China starts to live like the developed nations and uses & out bids for more and more resources, the developed nations will be forced to act more ethically.

Your analysis of the problems of “degrowth” (what a ridiculous term) is interesting but in deciding whether or not it’s a “credible proposition” it would be useful to consider the alternative.

Continued growth in rich countries leading to accelerated climate change. The profound costs of this will be shouldered mainly by the poorest people in the world and they will last for hundreds, maybe thousands, of years.

Is that a “credible proposition” for an international development charity or, indeed, anyone with a sense of ethics?

So we have two non-credible propositions: one which leads to upheaval and social problems in the short-term; the other which leads to runaway climate change which would cause similar but much more profound problems in the long term.

The solution, as you hint at Duncan, surely lies in how to overcome the problems and make the policy work? Then in how to sell it to those in power.

Oxfam could be leading the international debate on this in a mature and reasoned way. But while you say that the degrowthers accuse anyone who disagrees of being a knave or a fool you suggest that those who want rich economies to shrink are “swivel-eyed”.

Hi Julian,
The response to criticisms like mine is often ‘but growth isn’t working’. I agree, but the cure has to be effective. To criticise degrowth is not to support growth, but to say we need something much coherent to pose as an alternative. I’ve given much more positive reviews on this blog for other critiques of the ‘growth is good’ school, and agree we should be helping to develop new thinking on this, but I was distinctly unimpressed with the degrowthers.

the bicycle problem comes from interest rates – the economy has to grow each year so that everyone’s debts can be paid with interest. however you don’t fundamentally require interest rates to make a money system work. in fact you get much more helpful dynamics from money systems with demurrage (negative interest) as they discourage hoarding of wealth and encourage exchange instead. demurrage also brings money back into alignment with natural systems – it decays if it isn’t used productively. Degrowth requires a different money system, but doesn’t necessarily require a long term recession – we are just conditioned into thinking that because we are so embedded in our current money system

As a former Berkeley student, I’m well aware of how exciting it is to construct “if I ruled the world” scenarios. In the real world, even the people who do rule the world find it hard to get what they want. Look at the US in Afghanistan.

The key to the success of the growth model is that allows firms to do well by pursuing growth individually, without requiring that everyone else do it at the same time. The problem with slowing the economy equitably is it requires everybody to agree to slow down at the same time. Otherwise, any firm or country pursuing de-growthers will indeed lose out.

I question the idea that growth means greater resource use. But there are many examples in which economic growth does not mean more resource consumption, because growth is a measure of economic value, not of resource consumption. So, for the ten years between 1990 and 2000, the value of exports increased by 20%, whereas the weight of those exports (tonnage) reduced by half. More value, less stuff. More software and movies, fewer cars.

Another thing that growth produces, which is not often talked about, is social mobility. In a static economy, it is much harder, if not impossible for poor people to take the place of the rich. One reason that the US continues to attract so many migrants is because it does have these high rates of social mobility, despite quite harsh conditions for the poor at the bottom.

Finally, yes, GDP is a crude measure, but it gets used because when GDP does go backwards, people suffer, and governments fall. They suffer precisely because of the bicycle principle. So if you can convince people to all work less when in concert, degrowth will result in suffering.

And unless you can develop a degrowth model in which people can voluntarily degrow without suffering, there is no way to kickstart or indeed implement such a move, except through autocratic means. That’s just a fact.

This is a conversational blog written and maintained by Duncan Green, strategic adviser for Oxfam GB and author of ‘From Poverty to Power’. This personal reflection is not intended as a comprehensive statement of Oxfam's agreed policies.